New bonds for roads advance in North Carolina

| Monday, August 22, 2005

The North Carolina Senate unanimously approved a bill Aug. 13 that would allow the state to issue transportation bonds financed with federal funds.

The bill now heads back to the House for final approval before going to Gov. Mike Easley for his signature.

The measure would allow the state to issue $900 million in grant-anticipated revenue vehicles, or GARVEE bonds, to use on transportation projects. No specific projects have been identified, The News & Observer reported.

The funding program breaks from the traditional pay-as-you-go method and allows the state to borrow money against the federal transportation dollars that come each year to pay for construction. The bond issue – or loan – is based on the assumption that federal funding in future years would pay off the bonds. This allows the state to get money needed for the project up front.

Because the bonds are repaid with future federal dollars, they don’t affect the state’s credit or impose an ordinary state debt.

Supporters say it makes sense to use future funds now, when highway construction costs are cheaper, the newspaper reported. They note the cost of construction is escalating at a rate higher than the cost to borrow money to build roads.

Opponents worry that spending future dollars now could leave the state in an even tighter pinch on projects in years to come. They also worry about relying on future revenue that is expected but not guaranteed.

The funding plan – HB254 – has the support of the governor.

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